ORGANIZING PROCESS
a) Determination of Objectives:
It is the first step in building up an organization.
Organization is always related to certain objectives. Therefore, it is essential
for the management to identify the objectives before starting any activity.
Organization structure is built on the basis of the objectives of the enterprise.
That means, the structure of the organization can be determined by the
management only after knowing the objectives to be accomplished through the
organization.
This step helps the management not only in framing the organization
structure but also in achieving the enterprise objectives with minimum cost and
efforts.
Determination of objectives will consist in deciding as to why the proposed
organization is to be set up and, therefore, what will be the nature of the work to be
accomplished through the organization.
b) Enumeration of Objectives:
If the members of the group are to pool their efforts effectively, there must
be proper division of the major activities.
The first step in organizing group effort is the division of the total job into
essential activities.
Each job should be properly classified and grouped.
This will enable the people to know what is expected of them as members of
the group and will help in avoiding duplication of efforts.
For example, the work of an industrial concern may be divided into the
following major functions – production, financing, personnel, sales, purchase, etc.
c) Classification of Activities:
The next step will be to classify activities according to similarities and
common purposes and functions and taking the human and material resources into
account.
Then, closely related and similar activities are grouped into divisions and
departments and the departmental activities are further divided into sections.
d) Assignment of Duties:
Here, specific job assignments are made to different subordinates for ensuring a certainty of work
performance.
Each individual should be given a specific job to do according to his ability and made responsible for
that.
He should also be given the adequate authority to do the job assigned to him.
e) Delegation of Authority:
Since so many individuals work in the same organization, it is the
responsibility of management to lay down structure of relationship in the
organization.
Authority without responsibility is a dangerous thing and similarly
responsibility without authority is an empty vessel.
Everybody should clearly know to whom he is accountable; corresponding to
the responsibility authority is delegated to the subordinates for enabling them to
show work performance.
This will help in the smooth working of the enterprise by facilitating
delegation of responsibility and authority.
ORGANIZATION STRUCTURE
An organization structure is a framework that allots a particular space for a
particular department or an individual and shows its relationship to the other.
An organization structure shows the authority and responsibility relationships
between the various positions in the organization by showing who reports to whom.
It is an established pattern of relationship among the components of the
organization.
March and Simon have stated that-"Organization structure consists simply of those
aspects of pattern of behavior in the organization that are relatively stable and
change only slowly." The structure of an organization is generally shown on an
organization chart. It shows the authority and responsibility relationships between
various positions in the organization while designing the organization structure, due
attention should be given to the principles of sound organization.
Significance of Organization Structure
Properly designed organization can help improve teamwork and
productivity by providing a framework within which the people can work
together most effectively.
Organization structure determines the location of decision-making in the organization.
Sound organization structure stimulates creative thinking and initiative among
organizational members by providing well defined patterns of authority.
A sound organization structure facilitates growth of enterprise by increasing its
capacity to handle increased level of authority.
Organization structure provides the pattern of communication and coordination.
The organization structure helps a member to know what his role is and how
it relates to other roles.
PRINCIPLES OF ORGANIZATION STRUCTURE
Modern organizational structures have evolved from several organizational
theories, which have identified certain principles as basic to any organization
structure.
a) Line and Staff Relationships:
Line authority refers to the scalar chain, or to the superior-subordinate
linkages, that extend throughout the hierarchy (Koontz, O'Donnell and Weihrich).
Line employees are responsible for achieving the basic or strategic
objectives of the organization, while staff plays a supporting role to line employees
and provides services.
The relationship between line and staff is crucial in organizational structure,
design and efficiency. It is also an important aid to information processing and
coordination.
b) Departmentalization:
Departmentalization is a process of horizontal clustering of different types of
functions and activities on any one level of the hierarchy.
Departmentalization is conventionally based on purpose, product, process,
function, personal things and place.
c) Span of Control:
This refers to the number of specialized activities or individuals supervised by
one person. Deciding the span of control is important for coordinating different
types of activities effectively.
d) De-centralization and Centralization:
De-centralization refers to decision making at lower levels in the hierarchy of
authority. In contrast, decision making in a centralized type of organizational
structure is at higher levels.
The degree of centralization and de-centralization depends on the number
of levels of hierarchy, degree of coordination, specialization and span of control.
Every organizational structure contains both centralization and de-
centralization, but to varying degrees.
The extent of this can be determined by identifying how much of the
decision making is concentrated at the top and how much is delegated to lower
levels.
Modern organizational structures show a strong tendency towards de-
centralization.
FORMAL AND INFORMAL ORGANIZATION
The formal organization refers to the structure of jobs and positions with
clearly defined functions and relationships as prescribed by the top management.
This type of organization is built by the management to realize objectives of an
enterprise and is bound by rules, systems and procedures. Everybody is assigned a
certain responsibility for the performance of the given task and given the required
amount of authority for carrying it out. Informal organization, which does not appear
on the organization chart, supplements the formal organization in achieving
organizational goals effectively and efficiently. The working of informal groups and
leaders is not as simple as it may appear to be. Therefore, it is obligatory for every
manager to study thoroughly the working pattern of informal relationships in the
organization and to use them for achieving organizational objectives.
FORMAL ORGANIZATION
Chester I Bernard defines formal organization as -"a system of consciously
coordinated activities or forces of two or more persons. It refers to the structure of
well-defined jobs, each bearing a definite measure of authority, responsibility and
accountability." The essence of formal organization is conscious common purpose
and comes into being when persons–
(i) Are able to communicate with each other
(ii)Are willing to act and
(iii)Share a purpose.
The formal organization is built around four key pillars. They are:
Division of labor
Scalar and functional processes
Structure and
Span of control
Thus, a formal organization is one resulting from planning where the pattern of
structure has already been determined by the top management.
Characteristic Features of formal organization
Formal organization structure is laid down by the top management to achieve
organizational goals.
Formal organization prescribes the relationships amongst the people working in
the organization.
The organization structures is consciously designed to enable the people of the
organization to work together for accomplishing the common objectives of the
enterprise
Organization structure concentrates on the jobs to be performed and not the
individuals who are to perform jobs.
In a formal organization, individuals are fitted into jobs and positions and work as
per the managerial decisions. Thus, the formal relations in the organization arise
from the pattern of responsibilities that are created by the management.
A formal organization is bound by rules, regulations and procedures.
In a formal organization, the position, authority, responsibility and accountability
of each level are clearly defined.
Organization structure is based on division of labor and specialization to
achieve efficiency in operations.
A formal organization is deliberately impersonal. The organization does not take
into consideration the sentiments of organizational members.
The authority and responsibility relationships created by the organization
structure are to be honored by everyone.
In a formal organization, coordination proceeds according to the prescribed pattern.
Advantages of formal organization
The formal organization structure concentrates on the jobs to be performed.
It, therefore, makes everybody responsible for a given task.
A formal organization is bound by rules, regulations and procedures. It thus
ensures law and order in the organization.
The organization structure enables the people of the organization to work
together for accomplishing the common objectives of the enterprise
Disadvantages or criticisms of formal organization
The formal organization does not take into consideration the sentiments of
organizational members.
The formal organization does not consider the goals of the individuals. It is
designed to achieve the goals of the organization only.
The formal organization is bound by rigid rules, regulations and procedures. This
makes the achievement of goals difficult.
INFORMAL ORGANIZATION
Informal organization refers to the relationship between people in the
organization based on personal attitudes, emotions, prejudices, likes, dislikes etc.
an informal organization is an organization which is not established by any formal
authority, but arises from the personal and social relations of the people. These
relations are not developed according to procedures and regulations laid down in
the formal organization structure; generally large formal groups give rise to small
informal or social groups. These groups may be based on same taste, language,
culture or some other factor. These groups are not pre-planned, but they develop
automatically within the organization according to its environment.
Characteristics features of informal organization
Informal organization is not established by any formal authority. It is unplanned
and arises spontaneously.
Informal organizations reflect human relationships. It arises from the personal
and social relations amongst the people working in the organization.
Formation of informal organizations is a natural process. It is not based on rules,
regulations and procedures.
The inter-relations amongst the people in an informal organization cannot be
shown in an organization chart.
In the case of informal organization, the people cut across formal channels of
communications and communicate amongst themselves.
The membership of informal organizations is voluntary. It arises spontaneously
and not by deliberate or conscious efforts.
Membership of informal groups can be overlapping as a person may be member
of a number of informal groups.
Informal organizations are based on common taste, problem, language,
religion, culture, etc. it is influenced by
Benefits of Informal organization
It blends with the formal organization to make it more effective.
Many things which cannot be achieved through formal organization can be
achieved through informal organization.
The presence of informal organization in an enterprise makes the managers
plan and act more carefully.
Informal organization acts as a means by which the workers achieve a sense of
security and belonging. It provides social satisfaction to group members.
An informal organization has a powerful influence on productivity and job satisfaction.
The informal leader lightens the burden of the formal manager and tries to fill in
the gaps in the manager's ability.
Informal organization helps the group members to attain specific personal objectives.
Informal organization is the best means of employee communication. It is very fast.
Informal organization gives psychological satisfaction to the members. It acts as
a safety valve for the emotional problems and frustrations of the workers of the
organization because they get a platform to express their feelings.
It serves as an agency for social control of human behavior.
DIFFERENCES BETWEEN FORMAL AND INFORMAL ORGANIZATION
Formal Organization Informal Organization
1. Formal organization is established with the 1. Informal organization springs on
its
explicit aim of achieving well-defined goals.
own. Its goals are ill defined
and intangible.
2. Formal organization is bound together by 2. Informal organization is
authority relationships among members. A characterized by a generalized sort
hierarchical structure is created, constituting of power relationships. Power in
top management, middle management and informal organization has bases
supervisory other than
management. rational legal right.
3. Formal organization recognizes certain 3. Informal organization does not
tasks have
which are to be carried out to achieve its any well-defined tasks.
goals.
4. The roles and relationships of people in 4. In informal organization
formal organization are impersonally defined the relationships among
people are
interpersonal.
5. In formal organization, much emphasis is 5. Informal organization is
placed on efficiency, discipline, conformity, characterized by relative freedom,
consistency and control. spontaneity, by relative freedom,
spontaneity,
homeliness and warmth.
6. In formal organization, the social 6. In informal organization
and psychological needs and interests of the sociopsychological needs,
members of the interests and
organization get little attention. aspirations of members get priority.
7. The communication system in formal 7. In informal organization,
organization follows certain pre-determined the communication
patterns and paths. pattern is haphazard,
intricate and natural.
8. Formal organization is relatively slow to 8. Informal organization is
respond and adapt to changing situations and dynamic and very vigilant. It is
realities. sensitive to its
surroundings.